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Referral Code: Definition, Types, Functions & How to Get It

Last updated: Jan 04, 2024

Referral Code: Definition, Types, Functions & How to Get It
Cover image: Illustration of a referral code.

What is Referral Code?

If you are a social media user, then you must be familiar with what is referral code.

A referral code is a unique code that you can use to avail of promotions, either in the form of discounts or cashback when making purchases during a specific period.

If you enjoy online shopping through e-commerce, then it is a component that will be very useful. You can enjoy advantageous offers by entering the code on the online shopping platform.

Generally, this unique code is used in online marketing strategies to encourage new customers to make purchases.

For customers, it is usually obtained through affiliates or influencers they follow on social media.

From a business perspective, this strategy is considered effective as the interest in purchasing tends to be greater if the product or service is offered by someone known or followed by the target customers.

Referral codes are a clever strategy that can bring in many new customers from various segments.

The success rate of this strategy is considered higher compared to offering promotions only through regular digital campaign activities.

Types of Referral Codes

After learning about what is referral code, let's explore some of its types. Here is more detailed information:

1. Rented Referral

One of these code examples can be obtained by registering directly on the provider's website.

As the name suggests, a rented referral requires you to pay a certain fee to obtain the code. After making the payment, you will be given a code that can be disseminated to the wider public.

Although it requires an upfront payment, this option is still worth trying if you want to increase passive income.

2. Direct Referral

Unlike rented referral, this type of referral is usually given directly to individuals who are considered capable of influencing a group to make a purchase.

After receiving a direct referral, a person usually only needs to enter the code in the provided column. This code then functions as a coupon that reduces the price or provides benefits such as cashback.

The Advantages of Referral Codes

In recent times, influential figures on social media have been actively leveraging referral codes to engage and connect with their followers. 

This unique code has become one of the most popular marketing strategies that offers substantial benefits for both companies or brands and potential customers. Let's delve deeper into how they function for various stakeholders.

1. For Companies

It serves as a strategic tool for companies aiming to boost brand awareness and establish authority in the contemporary market. 

Amid the prevalence of social media and innovative marketing techniques like affiliate marketing, these codes play a pivotal role in significantly increasing business revenue. 

By indirectly attesting to the satisfaction of previous customers, often influencers followed by the target audience, companies can achieve the following:

  • Increase positive exposure cost-effectively.
  • Expand reach and capture new audiences.
  • Reinforce brand relevance by aligning with market trends.
  • Foster customer loyalty through incentivized promotions.

2. For Code Owners

For individuals holding these specific codes who successfully influence a group of people to make purchases can lead to diverse benefits. Target customers making purchases using the code, known as downline, can generate various commissions, including:

  • Click Commission: Earned for every click on an ad or referral link.
  • Upgrade Commission: Applicable when a downline upgrades their account (commonly used in applications).
  • Purchase Commission: Awarded for every purchase made by a downline.

3. For Consumers

Consumers, from their standpoint, find value in using referrals to enhance their shopping or service experiences.:

  • Access to discounts through price reductions.
  • Participation in limited-time promotions for exclusive offers.
  • Receipt of additional rewards such as gifts or loyalty points, demonstrating appreciation for their engagement.
  • In conclusion, referrals emerge as a dynamic force in modern marketing, fostering collaboration between influencers, companies, and consumers while creating a mutually beneficial ecosystem.

Referral Code Examples

In the explanation of what is referral code above, it was mentioned that these codes consist of numbers, letters, or even symbols. 

Typically, the letters in the code are derived from the initials or abbreviations of the owner's name. Here are some of the widely known referral code examples when given to an influencer:

 Illustration of A Referral Code in Social Media Profile
Figure 1: Illustration of A Referral Code in Social Media Profile

Note: The referral code is a combination of numbers and letters enclosed in a red box.

How to Get A Referral Code

After understanding that this type of code can help you generate passive income, you might be curious about how to obtain it in widely used applications.

The process of obtaining such code varies between different applications, but the general steps are as follows:

  • Log in to the application.
  • Click on your account profile.
  • Once you are in the profile menu, look for the "Referral Code" section.
  • Copy the code.
  • Share the code (it can be a code or a link) with your friends, colleagues, or followers.

However, if you are an influential individual capable of shaping the opinions of your followers, brands will often offer collaborations using this strategy.

Cara Kerja Kode Referral

Understanding what is referral code also entails knowing how it works. In general, the operation of this code can be described as straightforward, involving a few key stages:

1. Creation or Activation

If you want to increase your earnings, you can implement this strategy. Some applications by default provide a code for each user. With this code, existing users are encouraged to invite new users to join and download the application.

2. Spread the Code

Once you have the code, the next step is to distribute it so that other users or potential buyers are enticed to use your code. 

The distribution process can be done through various platforms, including social media, private messaging, in-person, or other promotional channels.

3. Redeem the Code

When a user activates the code, the system initiates the redemption process by collecting the database. 

The code then undergoes a verification stage. The brand and the company providing the code accumulate data on how extensively the code has been utilized.

4. Earn Commission

After the code usage is verified, the system immediately provides a commission according to the initial policy, which could be in the form of funds, discounts, points, or other benefits.

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